Géraldine Amiel in Paris and Selina Williams in Kazakhstan were far ahead of competitors in reporting that the consortium developing the $50 billion Kashagan oil field had found a solution to restart production at the giant project which has been plagued by years of delays and cost overruns. Oil companies Exxon, Shell, Total and Eni had shut down production at the field in early October, less than a month after it had started up, after detecting deadly gas leaks from a key pipeline. The companies are scrambling to get the oil flowing to generate revenues amid looming financial penalties from the Kazakh government and a big repair bill. The consortium’s solution of re-injecting the gas back into the reservoir will allow oil production to restart and the consortium to start recouping some of their massive investments in the field. Before the story was published industry sources had predicted the oil field could be shuttered for up to two years while the pipeline was repaired.

THE STORY:

By Geraldine Amiel in Paris and Selina Williams in Astana, Kazakhstan

Updated Jan. 17, 2014 1:04 p.m. ET

Operators of Kazakhstan’s huge Kashagan oil field are considering a temporary solution to resume output, halted indefinitely since mid-October after a series of dangerous gas leaks, people with direct knowledge of the plan said.

Before the stoppage, sour and toxic gas coming off the offshore field in the Caspian Sea was separated from crude oil, and sent to an onshore processing plant via a 56-mile pipeline. But the pipe is plagued by leaks and the North Caspian Operating Co. running the $50 billion project has yet to determine how to fix it.

Releasing the potentially lethal gas into the air or flaring it isn’t an option because of safety and environmental regulations.

Exxon Mobil Corp. Royal Dutch Shell PLC PLC, and other members of the NCOC consortium are now looking into a makeshift solution that would involve re-injecting the gas into the ground, the people familiar with the matter said.

Although it could take several months to install the necessary compressors, the gas re-injection plan would help NCOC to minimize revenue losses while figuring out a permanent solution for the pipeline.

Restarting production could also allow NCOC members to reassure the Kazakhstan government, angered by years of delays and cost overruns, that they can get the project back on track.

A spokeswoman at Shell declined to comment. Exxon referred inquiries about Kashagan to NCOC.

The consortium had planned to rely on gas re-injection—a technique often used in the industry to manage pressure inside underground reservoirs and enhance oil recovery—only in a later stage of the Kashagan project.

NCOC members are still debating whether they should go ahead with the temporary plan or focus resources entirely on repairing the pipeline, the people familiar with the matter said.

The consortium began producing crude oil on Sept. 11, but output was halted on Sept. 24 after a leak on the onshore section of the gas pipe was detected. Production restarted soon after, but the group stopped it for a second time on Oct. 9 after detecting another leak.

Following the shutdown in October, the consortium launched an in-depth investigation. Onshore oil and gas pipes were excavated for inspection.

Analysis has revealed problems with as many as 20 welds, from the roughly 2,200 along the pipeline, a person familiar with the matter said. The number of faulty welds suggests NCOC may not need to replace the pipeline entirely, the person added.

Although further analysis is under way, experts believe a problem occurred during the pipeline-laying process, when pipes were heated before welding, the person said. Improper heating or cooling may have altered the tube’s resistance to the sour gas.

Kashagan had output of about 65,000 barrels a day at the time of the stoppage in October. NCOC has said it plans on ramping up production to 370,000 barrels a day in 2015 and could reach a level of 1.5 million barrels a day later in the project.

Email *Please fill in the required field. By clicking submit, I agree to the Privacy Policy and Cookie Policy and I understand I will receive marketing communications from Dow Jones professional information products from which I may unsubscribe using the links provided.

Thank you

Thank you for subscribing, your information has been submitted successfully.